Beginning in October 2024, the trend of declining long-term interest rates reversed the course of yields on the benchmark 10-year U.S. Treasury note. It rose sharply again on Wednesday as investors reacted to the newly published January consumer inflation report. Given the state of the market, investors might wish to reconsider the place of bonds in their diversified portfolios. Read further for details.
Recommended:
NEW: Buy and Sell These ‘Trump Stocks’ Immediately
President Donald Trump has now signed more executive orders in his first 10 days than any recent president has in their first 100 days. He’s making waves in immigration policy… international trade… and public health, while most investors are frozen, wondering what might happen next. That’s why Professor Joel Litman – who has consulted with both the Pentagon and the FBI – is stepping forward to lay out what he thinks is about to happen… and exactly which types of stocks to buy and sell immediately.
Click here to get the full story.
Higher-Than-Expected U.S. CPI
The direction of U.S. interest rates may be largely determined by Federal Reserve Chair Jerome Powell’s remarks and U.S. inflation numbers.
According to the Bureau of Labor Statistics, the consumer price index increased by 0.5% in January and has increased by 3.0% over the previous 12 months. These numbers are higher than economists’ forecasts of 2.9% annual gain and a 0.3% monthly increase.
Even though the headline numbers were greater than anticipated, stock market futures rose after the release, while Treasury yields fell significantly. Details of the report that pointed to a somewhat more moderate inflation forecast were cited by Wall Street analysts.
Producer Price Index (PPI) Points Out Lower Fed Inflation
The Bureau of Labor Statistics said Thursday that the producer price index, which measures what producers receive for their goods and services, grew by a seasonally adjusted 0.4% on the month, while the Dow Jones estimate was for a 0.3% increase.
The core PPI that excludes food and energy rose by 0.3%, aligning with projections.
Over the last year, the overall PPI climbed by 3.5%, surpassing the central bank’s target. Although inflation numbers can fluctuate and the forecast could shift based on what happens in the next months, the CPI and PPI reports collectively are delaying expectations for a rate drop until the second half of the year.
While the producer and consumer price index reports are commonly referenced inflation indicators, they are not the primary measures used by the Fed. Instead, the central bank emphasizes the personal consumption expenditures price index. It will be published by the Commerce Department later this month.
Economic Implications Of Trump 2.0
As you can see, markets are taking up right now, but we might expect more volatility in the close future. If you are well prepared, you can easily deal with market volatility. For investors looking to stay connected to the bond market, this opportunity may provide you valuable insights.
Everything what Trump is doing right now seems like it is going to make the 10Y going up. A lot of Trump policies are expected to be inflationary. This might be an issue in the long term. And 10-year treasury yield could reach 5%. Of course, investors need to closely monitor the markets, because the prospect of a sharp move might start acting as a break on the equity market gains.
Recommended:
Claim Marc Chaikin’s Top 10 Stocks for 2025
When this 50-year Wall Street legend releases his “Top Stocks” list for the year ahead, experienced readers drop what they’re doing and go grab a pen and paper. Marc Chaikin’s stock system would’ve helped you identify 44 of the top 50 stocks last year. In 2023, it flashed “bullish” on 44 of the top 50. Today, he wants to hand you two tickers for free.
Most recently we learned that Deere & Company’s stock price is going significantly down Here’s why.
John Deere US Stock Falling as Farmers Spent Less On Equipment
Lower farm income and elevated interest rates are the main reasons why farmers chose to postpone equipment purchases.
On February 13th Deere reported 1Q 2025 Earnings showing sinking revenue of $8.51B, compared with $12.19B for Q1 2024. Net sales for Q1 are down 37% from the same period last year.
Deere projected a 15%–20% decline in sales of Production and Precision agricultural equipment for Q1 2025, along with a 10% decline in Small Ag and Turf net sales. Sales of Construction and Forestry equipment are also predicted to decline by 10-15%.
The forecast does not account for the “uncertain and rapidly evolving environment” surrounding Trump administration policies, specifically reductions in funding for the U.S. Agency for International Development reportedly jeopardize $2 billion in U.S. commodity purchases for humanitarian food aid.
The revised 25% Trump tariffs on steel and aluminum, announced last week, are expected to increase the cost of manufacturing machinery in the U.S., potentially impacting Deere’s profit margins.
This is before considering the potential 25% tariffs on imports from Canada and Mexico, along with other reciprocal tariffs Trump is set to announce today. Deere noted that 10% of its cost of goods originates from Mexico as it has some facilities there.
Deere & Co’s (NYSE: DE) stocks were down more than 2% Thursday morning after we watched them grow more than 20% in the last year.
The business may not pick up as quickly as Deere management anticipates for the remainder of the fiscal year, which could worry some investors. Full-year equipment sales are expected to drop by about 15% annually, according to Wall Street. The drop was more like 35% in the first quarter.
Deere’s sales and earnings are expected to decline significantly in fiscal 2025. Farmers have faced challenging conditions recently, with U.S. net farm income at approximately $163 billion in 2024, down from $165 billion in 2023 according to the USDA. Lower farm income means less spending on equipment.
There is some optimism for a recovery, as the USDA projects net farm income to rise to $194 billion in 2025. However, when the income increase will translate into higher demand for new Deere equipment remains uncertain.
